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Tata Motors is working on setting up four scrapyards in India. Tata's first four scrapyards are being set up in association with its dealers in Greater Mumbai, Hyderabad, Howrah, and Karnal. The scrapyards will first deal with commercial vehicles only and at a later stage might start dealing with passenger vehicles too.
The vehicle scrapyard industry in India has for decades now been functioning as one of the unorganised sectors. Hundreds of small private scrapyards are scattered across the country and their business has so far been unregulated. The central government however has brought in a few regulations that change the way scrapyards have been functioning.
These new regulations also allow corporate giants and manufacturers to step into the scrapping industry. These regulations also mandate the scrapping of commercial vehicles once they turn 15-years-old. Hence, it is quickly turning into a profitable industry that almost all manufacturers would want to take advantage of.
Toyota, Maruti Suzuki as well as Mahindra have already started exploring ways to get into the scrapping industry. Tata might become the first commercial vehicle manufacturer to enter this segment. Tata has been India's leading commercial vehicle manufacturer for a long time now.
The brand makes some of the best trucks and buses in the country. Now it seems like the brand wants to reach out and get into the commercial vehicle scrapping space as well. Tata Motors will set up these scrapyards through its dealers. Though the brand will provide the technology and know-how, it won't be directly involved in the scrapping process.
Tata won't even invest directly in the scrapyard business but the investment will be brought in by the dealers themselves. With the new scrap rules, the government has proposed to completely waive off the registration fee and will also give a road-tax rebate of 15-25% on the new vehicle purchase.
Scrapyards are expected to offer a price of between 4-6% of a new vehicle. The government has also suggested that manufacturers offer a discount of 5 percent on the new vehicle if buyers produce a certificate of scrapping.
As aforementioned, Tata's scrapyards will first deal only in the scrapping of commercial vehicles and might slowly move to passenger vehicles as well. Tata hasn't officially confirmed it, but this news has surfaced through a media report.
Thoughts On Tata Motors Setting Up Vehicle Scrapyards
The benefits provided by the scrapping industry to a manufacturer are quite obvious. The new laws will force owners to scrap their 15-year-old vehicles irrespective of its condition. Almost all parts of the scrapped vehicle will be usable in one form or another, which is a huge benefit.
An added benefit for the manufacturer is that, once the vehicle is scrapped, the owners of the vehicle will be back in the market, looking to purchase a new one which will definitely improve sales numbers. Tata will benefit hugely from being the first mover in the commercial vehicle scrapping business.